Report: Many Community College Students Blocked From Federal Loans

Across the nation, nearly 1 million community college students in 32 states do not have access to federal student loans that could help them better afford the cost of college – a problem that leaves some turning to private student loans, working longer hours, or using credit cards to make ends meet, according to a new report.

The report – released today by the Institute for College Access & Success (TICAS) – found that nearly 1 in 10 community college students does not have access to federal student loans because their schools do not offer them. The report also documented disparities in access to student loans by race and ethnicity, state, and urban or non-urban status.

Overall, in eight states, more than 20 percent of community college students attend schools that do not participate in the federal student loan program, the report found.

Minority students and those in non-urban areas were also significantly more likely to attend schools that do not offer student loans. While just 8.3 percent of white students and 4.5 percent of Asian students lacked access to federal loans, 10.5 percent of Latino students, 12.7 percent of African American students, and 22.2 percent of Native American students attended community colleges that did not offer student loans, the report found. Those racial disparities were even more pronounced in certain states, such as Alabama, Montana, Tennessee, and Texas.

And students in non-urban areas were more than twice as likely than students in urban areas to attend schools that do not participate in the federal student loan program.

“The vast majority of full-time community college students need financial aid, and hardly any have their need fully met by grants – just 2 percent. Despite relatively low tuition and fees, community college students still face average total costs of $15,000,” said Debbie Cochrane, TICAS’ research director and co-author of the report, in a statement. “Federal loans can help students buy textbooks, pay for child care while they’re in class or studying, fix their car so they can get to school, or quit a second or third job to take more classes and increase their odds of graduating. Federal loans are the lowest-cost option for students who need to borrow to stay in school, but too many schools take that option off the table.”

The report notes that some schools do not participate in the federal student loan program because of concerns that high default rates will lead to negative consequences, but highlights some default management strategies at the community college level that could help ease those concerns and give students access to more financial aid. The report suggests, for example, that colleges tailor the student loan information they distribute to students, and get the entire campus involved in default management plans.

The report also makes several recommendations for how the Department of Education (ED) can ensure community college students have access to federal loans, and lower default rates. The report suggests, for example, that ED publish a college’s borrowing rate alongside its cohort default rate to help put those numbers in context, and note whether schools offer federal loans in consumer reporting tools so students know ahead of time whether they will have access.

“Federal loans can enable students to attend college full time, helping them succeed in school and repay their loans as a result,” said Laura Szabo-Kubitz, TICAS’ California project manager and report co-author, in a statement. “Offering federal loans is a natural fit with community colleges’ efforts to support student success.”

Publication Date: 6/29/2016

Dori B |
6/29/2016 2:28:31 PM

As the FAA at a community college in North Carolina with the last four years of CDRs over 30%, I become extremely frustrated with suggestions that CC’s simply “tailor the student loan information they distribute to students and get the entire campus involved in default management plans.” My institution required every student borrower to meet one-on-one with a Financial Aid counselor to discuss their borrowing needs. We helped students design a budget and required that students calculate the total cost of their intended major and compare entry level wages in their intended occupation. We strongly encouraged “students to borrow only if they need to, and only as much as they need.” However, when push comes to shove, if a student wishes to take a Direct Loan the college has NO choice but to certify the request. Perhaps a second Direct Loan program is in order, specifically designed to address the unique needs of community college students. The current one-size fits all nature of the current loan program is NOT working. Most importantly, do not tie an institution’s ability to participate in the PELL Grant program to default rates. Nearly 80% of the students enrolled at my institution qualify for and receive PELL Grant funds. My institution was forced to make the difficult decision to cease participation in the Direct Loan program because we were, and still are, facing sanctions. Based on our student demographics, it was critically important to protect student access to the PELL Grant program. Professional judgement on a case-by-case basis is NOT the answer. Many factors beyond the control of the institution factor into high default rates.

David S |
6/29/2016 12:22:07 PM

During the last few years of FFEL, there were lenders redlining community colleges...simply wouldn't lend to their students, most likely because they felt there wasn't enough money to be made. I was working in that sector at the time, and the school's biggest lender just one day told us that they wouldn't be processing any more loans from us. I know that some CC's left the federal loan programs out of fear of the consequences of high default rates, but I wonder if some were the result of this redlining...which to me, shouldn't have been permitted.

James C |
6/29/2016 10:21:30 AM

Since community colleges cannot limit loan amounts it is an all or nothing proposition. Also, the community college student population lends itself to being at high risk for default and the schools get punished. I think default rates would decline if student loans were not permitted for remedial coursework. Many community college students take primarily remedial courses during their first year and then drop out and default. Allow Pell but not loans for remedial courses.

Joseph K |
6/29/2016 9:55:12 AM

This is not an issue in our state. It is ironic that lawmakers are concerned that some students are unable to saddle themselves with loan debt to make it through college. Some of the same leaders want additional financial literacy efforts to encourage students to borrow responsibly. And yet Congress deficit spends greater than a trillion more every year than taxpayers provide. ($10-$11 trillion in the last 8 alone.)

Allowing financial aid administrators flexibility to adjust loan amounts based on predicted outcomes and earnings potential could be a path to a more common sense approach. A mechanical engineer or a nurse will have higher income potential than a barber. We should be allowed to offer loan limits in accordance with common sense predictive metrics.

Valerie C |
6/29/2016 9:54:08 AM

I concur with Henry Q's sentiment that FAA's in Montana are very student centered and will advocate for whatever assistance is available for their educational success. I believe since this report only reviews loan access, there is some information that is a bit skewed. In Montana, some of the tribal colleges are the only institutions that have opted-out of participating in the federal loan program. These institutions have several types of grant and scholarship monies to assist their students. This is where the majority of Native American's attend college within the state. If a Native American student chooses to attend an institution within the Montana University System they actually have access to a tuition waiver. There are also tribal grants that will follow the student regardless of where they attend college. Native American students do not have a reduction in monies for access to college in the state of Montana. The majority of these students actually have more 'free' monies available to them than any other ethnicity within the state, which means they have the least amount of need for student loans.I do understand the consequences are rather steep for colleges with high default rates. It is difficult for institutions to truly have any control over the students' payment activities. We are able to give them all of the information, but just because you can lead a horse to water, doesn't mean you can make him drink. Regardless, I do still think it is the institution's duty to advocate for access to as many students as possible. It's difficult to see such drastic consequences when the majority of institutions and students are doing the right thing. Why should the majority suffer for the negative actions of a few?

Stacey D |
6/29/2016 9:46:36 AM

Most students who attend community colleges don't need loans. They typically qualify for a large enough Pell Grant to cover the costs of tuition, fees, and books AND still receive a refund.

Jeff A |
6/29/2016 9:22:25 AM

Why does participation have to be "all or nothing". Amend the PPA to allow institutions to choose a participation level. For example, choose to participate at a $2000 level which would allow loan certification for no more than $2000 per academic year. The law could probably be interpreted to allow this.

Mary K |
6/29/2016 9:21:11 AM

This control over student loans was true in New Jersey as well and for the same reason, fear of high default rates. Students needed to make appointments with Asst. Dir in order to be educated about how loans work and then to make out loan application.

Onemek

Henry Q |
6/29/2016 8:57:23 AM

My institution, an Alabama community college, has always participated in the federal student loan programs. My colleagues at institutions who have left the federal loan programs encouraged their administrations to do so mainly out of fear of losing eligibility for all Title IV aid if their default rates rose too high, as the article states.

The transient nature of community college students, combined with ED's insistence on maxing out loans to Title IV recipients, makes many aid administrators at 2-year colleges feel like they are being forced to manage the loan programs in an unsustainable manner. As a result, most Alabama community colleges have opted out.

Financial aid administrators in this state are every bit as interested in helping students succeed as others whose institutions have remained in the federal loan programs, but the fear of "negative consequences" is real.

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